Original link: https://www.latepost.com/news/dj_detail?id=1656
“Tesla will start advertising and see how it works.” At the shareholder meeting on May 16, US time, Tesla CEO Elon Musk (Elon Musk) just finished speaking, and the crowd began to cheer. The applause was stronger than when Musk mentioned the long-awaited models and technologies in the market.
“Tesla is interested in running an ad that is informative and beautiful.” Musk told CNBC in an interview after the meeting that he didn’t decide to do it until he was asked about it at the meeting.
In the past 20 years, Tesla has never advertised, has no dealers, and has extremely reduced costs other than production and R&D, thereby reducing car prices to the extreme.
“Tesla does not advertise. Instead, we use the money to make products better,” Musk reiterated in 2019 that more and more Tesla cars on the road are advertisements.
These concepts and practices have made Tesla the company with the largest profit margin in the automotive industry. The gross profit margin of automobiles once exceeded 30%, twice that of luxury car brands such as BMW, and even surpassed Rolls-Royce.
This allows Tesla to keep cutting prices to get more sales. Musk was very sure of this. He believed that the only thing stopping people from buying Teslas was that the cars weren’t cheap enough.
However, with the intensification of competition in the electric vehicle market and changes in the macroeconomic environment, Tesla’s repeated price cuts have had little effect. In the first quarter of this year, Tesla relied on continuous price cuts to sell 422,000 vehicles, an increase of only 4% from the previous quarter. The results were not as good as market expectations, and the gross profit margin of the automotive business dropped from 28.5% last year to 21.1%. Tesla’s inventory of cars is growing, filling ports.
After the first quarter financial report was released this year, Tesla has raised prices again in markets such as China and the United States. Tesla’s multiple price increases last year were due to rising costs of components such as lithium batteries. But for the latest price increase, neither Musk nor Tesla gave a specific reason, but only said that the price was based on demand. Many auto industry analysts believe that Tesla urgently needs to repair its gross profit margin.
Now, Musk agrees with the shareholder’s suggestion that some more traditional methods can be used to tell Tesla’s story and improve the company’s operating conditions.
More choices, Tesla will double the number of models on sale
Tesla’s strategy of relying on a small number of high-quality models to boost sales is also changing. Musk today announced the next phase of Tesla’s model plans:
- The Cybertruck pickup is expected to be delivered in the third quarter of this year, and will reach a production capacity of 250,000-500,000 next year. Market information shows that Tesla currently has 1.6 million Cybertruck orders.
- The next-generation Roadster supercar, which is expected to be delivered in 2024, won’t sell too many.
- The next-generation model, which costs half as much as the Model Y, is expected to be delivered in 2024 and will be produced at Tesla’s Mexico plant.
- Another new model under development, the delivery time is unknown, and Musk expects that the cumulative annual sales of this model and new cars from the Mexican factory will exceed 5 million vehicles per year.
In addition, market information shows that Tesla is still preparing for the facelift of Model 3 and Model Y, which will be put into production in June this year and next year, respectively.
In the past 4 years, Tesla has only sold 4 models. This is the first time since Tesla was founded that it has released new cars and brought them to the market so intensively.
Tesla sold 1.31 million vehicles last year, mostly Model 3 and Model Y. Musk said two months ago that Tesla only needs 10 models to sell 20 million vehicles a year. Toyota, which now sells about 10 million vehicles a year, has more than 40 models on sale — excluding affiliates such as Lexus.
Developing fewer models is a manifestation of Tesla’s concept of extreme cost reduction, which can open fewer molds, reduce overall R&D and design costs, and focus on fewer things.
Tesla strives to greatly improve the design and manufacturing process of each model, and redesigns the production line based on each model, relying on lower production costs to take the lead. This also means that Tesla has to overcome more difficult technologies, and its R&D investment has to take greater risks, and it will be transformed into product and market competitive advantages at a slower rate.
The product is more difficult to make, and once it is realized, it will give Tesla a big lead. The Model 3 model that put Tesla into production hell is a precedent. Although Model 3 was difficult to produce, it led the reform of automotive electronic and electrical architecture technology, shortened the original 3-kilometer wiring harness on the car to 1.5 kilometers, and reduced the number of parts from about 30,000 in Model S to 10,000. Significantly reduce manufacturing costs.
Cybertruck is also an example. From its name to its appearance, it does not look like a traditional car, and it uses a completely different manufacturing method from other cars, but Musk did not disclose specific details. In order to reduce costs, Tesla applied a 48V electrical system to the Cybertruck for the first time and self-developed and produced 10 of the 12 control units in the vehicle.
These technical difficulties have made Cybertruck go through a long development cycle. Cybertruck was released in 2019. It is the model with the most bounced tickets and the longest development time since the establishment of Tesla.
A silhouette of a new model Tesla is secretly developing. Source: Tesla
Tesla’s next-generation car still continues this research and development path, and Tesla even redesigned the production line for it. Musk has high hopes for them, thinking they will outsell all of Tesla’s previous vehicles combined.
But at the moment, Tesla still needs new products to stimulate the market. Its choice is not much different from many traditional cars-modified popular models, plus better interiors.
Compress costs and control the production and use of raw materials such as cobalt, nickel, lithium, copper and rare earths
Musk once said that the essence of competition in the automotive industry is the competition of manufacturing capabilities, that is, the competition of factories.
At this general meeting of shareholders, he extended the competition of manufacturing capacity to raw materials. In his 35-minute speech, he mentioned at least seven raw materials including cobalt, nickel, iron, lithium, copper, rare earth, and silicon carbide. This has not happened at all of Tesla’s previous events.
Lithium, which is directly related to car batteries, has attracted much attention. Before the shareholder meeting, Tesla announced that it would invest US$375 million in a new lithium refinery in Texas, USA, with a supply capacity of 1 million vehicles per year.
Musk said that lithium resources are all over the world, and there is no shortage of lithium in the United States. The previous surge in material prices was due to the inefficiency and high cost of refining lithium suppliers, and Tesla should take over by itself.
Two years ago, Tesla released a new lithium production process that can reduce the production cost of lithium materials by 30%. In April last year, Musk tweeted that “lithium prices have gotten out of control, and Tesla has to enter the field of lithium mining and refining.” In the future, Tesla’s goal is to further improve the purity of lithium refining, which can indirectly increase the production capacity of lithium batteries. The life of the current battery-grade lithium material is 99.5% pure. Tesla will also build a refinery for lithium battery anodes in North America.
Musk believes that due to the geopolitical and macroeconomic environment, the prices of the main raw materials used in electric vehicles are fluctuating violently. Tesla expects to reach a production capacity of 20 million vehicles per year in the future, and it needs to do more to ensure the stability of the supply chain.
Tesla has improved product design to control the three-electric system, which is greatly affected by the price of raw materials and accounts for about 55% of the cost of the vehicle. At present, more than half of Tesla’s cars use iron-based lithium iron phosphate batteries, which reduces the use of cobalt and nickel.
In the next generation of models, Tesla will also use new motors and electric drive systems to reduce the use of silicon carbide materials by 75% and abandon rare earth materials. These improvements cut the cost of the complete electric drive system by about $1,000.
The new 48V electronic and electrical architecture makes the wires in the car thinner by increasing the voltage of the electrical system, which can reduce the copper consumption of the entire car by 75%.
Improve profits and do better autonomous driving functions
Like the shareholder meetings in previous years, Tesla’s assisted autopilot system FSD (Full Self-Driving) is the most talked about topic by Musk.
Musk reiterated the view that the self-driving system can increase the value of the car, “Currently, each car only uses 10-12 hours a week, most of the time in the parking lot. If fully autonomous driving is realized, the vehicle can be shared, and the use of A 5x increase in efficiency. Equivalent to a 5x increase in the value of a car overnight.”
FSD can bring Tesla greater profit margins. Musk said in an earnings call last month that Tesla’s best business model is to “sell more cars at a lower price, or even zero profit, and then rely on the self-driving system to make a profit.”
But the premise of all this is that more people are willing to pay to subscribe to FSD. According to information released by Tesla, by the end of 2022, 285,000 people in North America have subscribed to FSD, accounting for only 19% of Tesla’s cars sold in the region.
Musk said at the shareholder meeting that Tesla will develop stronger artificial intelligence to make FSD better and safer. This will attract more people to use it.
A week before the shareholder meeting, Musk said that FSD will usher in a major upgrade, and the next-generation system, FSD 12.0, will be greatly upgraded to achieve “end-to-end artificial intelligence.”
In the current FSD, artificial intelligence helps the system identify objects on the road based on the data collected by cameras and other sensors (as input), and the link of determining how the vehicle drives (as output) needs to rely on traditional path planning algorithms. Find the driving path of the car under the rules.
According to Musk’s Twitter, the “end-to-end artificial intelligence” in Tesla FSD 12.0 refers to the link that determines how the vehicle drives, and is also controlled by artificial intelligence, learning how to determine the driving path of the car from a large number of driving data .
Using artificial intelligence to control the car can handle more complex environments and traffic scenarios than relying on rules to control how the car drives. “Based on the rules, there will inevitably be some situations that cannot be handled. You have to write the rules, update and modify them,” an autonomous driving entrepreneur once told “Later Auto”. Large-scale automatic driving cannot be based on this method, because “There are 100,000 or millions of mass-produced cars, and the driving areas are different and the roads are different.”
The problem is that artificial intelligence itself is a “black box”. When there is a problem with the automatic driving of the car, it is difficult for people to figure out where the problem is. They can only rely on a large amount of data to train the system to make it run as safely as possible.
Compared with Musk’s occasional emphasis in the early years that Tesla’s autopilot system is close to the level of L5 (no human participation required at all), Musk now has more “awe” when talking about autopilot technology.
“We always feel as if we are about to fully realize (unmanned driving). But in fact, we may have just reached a new height, and it will be difficult to break through a little bit more.”
He said that Tesla’s goal this year is to make autonomous driving safer than human driving, but then explained that “it does not mean that people do not need to be supervised at all.” He promised that drivers who stared at Tesla’s autopilot system would be four times safer than driving themselves. But Musk’s long-term goal of achieving driverless driving has not changed. At the earnings conference held last month, Musk said that Tesla internally called the next-generation car a “robotaxi” (unmanned taxi).
Under the leadership of Musk, Tesla has always been an outlier in the auto market. It got rid of the dealer network, did not advertise, dynamically adjusted the price of cars, and listed the automatic driving system as an important selling point when the technology was not yet mature.
As electric power becomes a clear direction of future car development, Tesla is getting bigger and bigger, and its special label is slowly weakening. At a time when the economic outlook is uncertain, Musk is looking for more market-proven, perhaps less special ways to allow Tesla to go through the cycle. This shareholder meeting may be just the prologue.
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